What a government shutdown really does

"We'll do a shutdown, and it's worth it for our country. I'd love to see a shutdown if we don't get this stuff taken care of." – President Trump, February 6, 2018
 
At midnight on January 19, government funding lapsed and we had the first federal government shutdown since 2013. Fortunately, the shutdown was brief and mostly happened over a weekend. The impact on government operations and services was minimal. Perhaps more painful than the shutdown was watching the political blame game unleashed in full force.
 
There is very little interest in Congress in another shutdown, but the President’s comment today may indicate that he’s willing to take that step. If so, his views on the subject have changed. The President criticized the shutdown during last month’s budget drama. He also sent a tweet on January 18 that said: “House of Representatives needs to pass Government Funding Bill tonight. So important for our country - our Military needs it!” In spite of what the President said today, a shutdown is unlikely.
 
Most government operations are funded currently under the fourth temporary funding measure – or continuing resolution (CR) – thus far in fiscal year 2018, which began October 1. The current CR expires at midnight, February 8, and a fifth CR will be needed to keep the government’s lights on. This evening, the House voted of 245 to 182 to pass a fifth CR and send it to the Senate.
 
What would a shutdown mean for federal agencies and employees, those who do business with the federal government, and the public at large?
 
Not every federal program is affected by a shutdown. Activities such as Social Security and Medicare benefit payments, which are funded under laws other than annual appropriations bills, will continue. However, some annually-funded activities related to those programs may be stopped. For example, according to the Office of Management and Budget (OMB), Social Security cards were not issued during the 16-day government shutdown of October 2013 (FY 2014). Applications of new Medicare beneficiaries may be delayed since the employees who process them can’t report to work.
 
If an employee’s salary is not funded through annual appropriations, or if it is funded by money remaining in an appropriations account from a previous year, they will report to work. Exceptions are also made that allow other employees to remain at their jobs. OMB permits agencies to keep employees who perform activities expressly authorized by law, “necessarily implied by law” (e.g., processing payments of Social Security benefits), or to protect life and property.
 
The most significant disruption will be to everyday government operations – most federal offices will close and many federal employees will be furloughed. About 40 percent of the federal workforce was furloughed during the October 2013 shutdown.
 
National parks will close or have services severely curtailed. Small businesses will be unable to have their loan applications approved by the Small Business Administration. Veterans’ disability claims appeals review will stop. Clinical trials at the National Institutes of Health (NIH) will be delayed (nearly 75 percent of NIH workers were furloughed in 2013). Statistical reports relied upon by businesses and issued by federal agencies including the Census Bureau, the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Energy Information Administration, and the National Agricultural Statistics Service could be delayed if a shutdown extends over several days.
 
The Department of Defense will also suffer. In 2013, DoD lost $600 million in productivity due to employee furloughs, according to its Comptroller at the time. Approximately 400,000 civilian employees were initially furloughed, although all but 5,000 returned after Congress passed legislation authorizing their salaries. Weekend training and drilling for about 850,000 reservists did not occur. New contract awards and some activities on existing contracts, such as inspections and approvals, were delayed during the shutdown.
 
Companies that do business with any government agency could feel the pain of delayed decision-making, contract administration, and payments. The Department of Energy’s Office of Environmental Management (EM), for example, stopped issuing work orders during the 2013 shutdown. This led to layoffs of contract employees at EM facilities. NIH reported that an administrative support service contract expired during the shutdown and a stop work order was issued.
 
Businesses other than federal contractors will also experience negative effects. Many small businesses rely on a federal presence near their location. National parks closures hit such businesses hard. The National Park Service estimated that Acadia National Park and the surrounding communities lost nearly 200,000 visits and $16 million in visitor revenue during the 2013 shutdown ($414 million lost nationwide). Near Acadia, a hotel reported losing $33,000 and another reported as many as 182 room cancellations, according to the Bar Harbor, Maine, Chamber of Commerce.
 
Shutdowns also weaken economic growth. The Bureau of Economic Analysis (BEA) reported in January 2014 that the 2013 shutdown reduced real gross domestic product by 0.3 percent in fourth quarter of that year. This estimate was based solely on lost productivity of furloughed workers; BEA could not isolate other, indirect economic impacts of the shutdown, such as lost earnings of furloughed contractors or other businesses.
 
In the event of a shutdown, the magnitude of impacts and costs described above will depend largely on the length of the funding lapse. A weekend shutdown, as was the case with the shutdown in January, will be barely noticed. A several-day or multiple-week shutdown will be damaging and expensive – both in monetary terms and, for the party that’s blamed for it, politically.